Donna Molloy Troubled Families Team, DCLG Troubled Families and employability skills.
Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future
-
Upload
barry-weaver -
Category
Documents
-
view
21 -
download
1
description
Transcript of Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future
![Page 1: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/1.jpg)
Higher Education in a Troubled Economy
Assessing the Damage and Forecasting for the Future
December 5, 2008
Sue Menditto
NACUBO
![Page 2: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/2.jpg)
Business Office Issues
Long term investments• Changes to asset allocation mix• The largest institutions have not (yet)
reduced spending rates– Several have increased– Smaller institutions
• Newer endowments• Under water• UPMIFA
![Page 3: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/3.jpg)
Business Office Issues
Long term debt• Reassessing structure of debt portfolio• Revisiting debt policies• Examining derivatives and counter-party
risk• No new construction• New debt covenants
![Page 4: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/4.jpg)
Business Office Issues
Balance sheet analysis• Liquidity• Rating agencies• Financial responsibility ratios – ED• Ratios as a tool• Financial reporting issues
![Page 5: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/5.jpg)
Business Office Issues
Financial Reporting
• Asset reclassifications
• Disclosures
• Fair market value
![Page 6: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/6.jpg)
Business Office Issues
Public Institutions• 3 – 17% cut-backs • Majority 3-5%
– Immediate– Double the percentage next fiscal year
Independent Institutions• Endowment declines• Enrollment declines
![Page 7: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/7.jpg)
Responses to Economic Conditions
• Decentralized environments become more centralized
• Business process review – goal is lean office practices
• Greater centralization of IT endeavors• Assess revenue contributions and related costs
of institutes, schools, departments, centers– Examine against mission critical / core programs– Examine contracts, even for tenured positions– Reexamine endowed chairs
![Page 8: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/8.jpg)
Responses to Economic Conditions
• Renegotiate contracts with vendors– Know benchmarks and standards– Consider outside help for above
• Construction contraction• Explore healthcare coalitions with other
institutions– Greater buying power– Cost reductions
• Conduct a vacancy review process
![Page 9: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/9.jpg)
Responses to Economic Conditions
• Workforce exploration– Staff salary freezes– Faculty salary freezes– Review faculty teaching loads– One time salary contributions– Centralize all hiring
• Open positions• FT / PT, lecturers, adjuncts
– Analyze workforce demographics• Explore pre/early retirement programs• Explore above first, especially if reductions seem
imminent
![Page 10: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/10.jpg)
Responses to Economic Conditions
Create a “war-chest” for increased financial aid needs– Carve out savings from departments, schools,
etc… a portion (if not all) gets remitted to central administration
– Central administration also finds cost reduction opportunities and earmarks for financial aid needs
– Reexamine funding / fund carryovers– Examine quasi-endowments
![Page 11: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/11.jpg)
Responses to Economic Conditions
Review “all things endowment”– Form “endowment liberation team”– Differential endowment payouts– Review endowment terms – determine how
restrictive they really are – Examine endowed chairs– Legal analysis of donor agreements – past
and going forward for flexibility– Quasi-endowments
![Page 12: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/12.jpg)
Responses to Economic Conditions
• Examine classroom size– Cut back on non critical courses– Distance learning– Examine “outliers” – from average classroom size
• Public institutions should ask state / Governor for help– Support salary freeze– Support fee increases
![Page 13: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/13.jpg)
Responses to Economic Conditions
Union Issues • Ask for renegotiation• Point out trade offs
– Current economic times– Positives– Negatives– A compromise is better than a shut down
• Seek legal advice, look for precedents
![Page 14: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/14.jpg)
Immediate Matters to Consider
• Has a current determination been made of whether there are any immediate liquidity needs that require action while longer-term analysis is undertaken?
• Are any of the three “warning signs” of financial stress turning critical? – Declining enrollment – Declining net tuition per student or declining net tuition – Declining liquidity due to investment losses or operating
deficit
![Page 15: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/15.jpg)
Immediate Matters to Consider
• Financial projections• Develop several scenarios
– Changes in revenues and expenses– Changing endowment yields– Enrollment changes– Debt fluctuations
![Page 16: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/16.jpg)
Immediate Matters to Consider
Estimate the following over 15 – 18 months– Current operating budget – State funding for operating and capital budgets – Student financial aid – Tuition and fees for academic year 2009-10 – Enrollment for spring term and next fall – Current hiring – Institutional debt/financing – Retirements of staff and/or faculty – Fund-raising and any anticipated comprehensive capital
campaign – Endowment and endowment spending – Underway or planned capital projects – Matching or in-kind obligations for grants or gifts
![Page 17: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/17.jpg)
Immediate Matters to Consider
• Is it appropriate to consider changing the annual endowment spending rate?– Near or mid-term – Assess consequences of above
• What communications about the current crisis have taken place?– Between the president and the board– Between the president and institutional stakeholders
(e.g., parents of students, alumni, and staff)? – Between the president and cabinet– Faculty senate
![Page 18: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/18.jpg)
Immediate Matters to Consider
• Has anyone either within the administration or on the board had significant experience working with an organization or a business undergoing severe financial hardship? – Seek advice – Gather information
• Has it been determined whether financial aid is sufficiently available for currently enrolled as well as incoming students (examine alternatives)– Short-term loans– Quasi endowment spending
![Page 19: Higher Education in a Troubled Economy Assessing the Damage and Forecasting for the Future](https://reader036.fdocuments.us/reader036/viewer/2022072015/56813064550346895d963b94/html5/thumbnails/19.jpg)
Resources
www.nacubo.org
• Financial downturn toolkit
• Financial reporting and accounting